Equity securities — common, preferred, ADRs, rights, warrants
**Common stock** represents residual ownership — voting rights, pro-rata claim on dividends (declared by the board), and pro-rata claim on liquidation proceeds after creditors and preferred. Statutory voting = 1 share = 1 vote per issue. Cumulative voting lets holders pool votes across director seats (favors minority holders).
**Preferred stock** pays a stated dividend (fixed rate or %). Features: • **Cumulative** — missed dividends accrue, must be paid before any common dividend. • **Participating** — in addition to stated dividend, shares in excess profits with common. • **Convertible** — exchangeable into common at a fixed ratio. • **Callable** — issuer may redeem at a stated price/date.
Preferred ranks senior to common but junior to debt in liquidation.
**ADRs (American Depositary Receipts)** — dollar-denominated receipts issued by US depositary banks representing foreign shares held abroad. Holders face currency risk on dividends and may face foreign withholding tax (creditable against US tax).
**Rights** — short-term (usually 30–45 day) privileges given pro-rata to existing shareholders in a rights offering, exercisable at a subscription price below current market.
**Warrants** — longer-term (typically 2–10 years) options to buy stock at a fixed price, often attached to bonds as a sweetener. Detachable warrants trade separately.
**Risks:** market risk, business/financial risk, regulatory risk, liquidity risk, inflation/purchasing-power risk.